* Africa's demand for oil products to grow rapidly by 2020
* Declining U.S. arbitrage leaves Europe with huge gasoline
* U.S., Asian refiners also targeting new markets
By Ron Bousso and Jonathan Saul
LONDON, Oct 28 Embattled European refiners face
an uphill battle with U.S. and Asian competitors to supply
Africa's rapidly growing appetite for fuel products as
transatlantic shipping routes are redrawn.
Demand for oil products in Africa, including the north of
the continent is expected to grow by more than 20 percent in the
next seven years to 4.4 million barrels per day (bpd), according
to Vienna-based consultancy JBC Energy.
Nigeria, Senegal, Togo, Kenya and South Africa are expected
to see the fastest demand growth in sub-Saharan Africa, analysts
say, while the continent's refining capacity is far from
matching this demand and will only marginally grow by 2020 from
current crude processing volumes of 1.925 million bpd.
"Most countries in the African continent prefer to import
finished products rather than produce in small outdated plants.
It's a question of technology and it turns out cheaper to
import," said David Wech, JBC Energy managing director.
Traders including Puma Energy, the African subsidiary of
Trafigura, Vitol, Gunvor and Mercuria have invested
heavily in expanding their African operations in recent
"We see double digit growth in most African countries, in
line with the expansion of Africa's middle class," an official
in a large European trading house operating in Africa said.
The continent has been a longstanding outlet for European
gasoline and gasoil, with exports more than doubling over the
past five years to around 600,000 bpd in 2013.
Its importance for Europe's refiners is rising, and becoming
even more important as demand for European gasoline in the U.S.
East Coast, the main export market for decades, rapidly dries
up, leaving refiners with a huge surplus that is weighing on
"Europe is going to need to get more into Africa if refiners
are going to survive," an oil tanker market source said. "TC2
(Rotterdam to New York route) should turn into a Europe-West
Africa route really, but the U.S. could displace that trade."
Huge U.S. Gulf Coast refineries benefiting from cheap shale
oil have in recent months exported record levels of diesel to
Europe, reversing trade flows.
They have also increased exports to Africa, which have grown
more than tenfold over the past decade to around 40,000 bpd in
2013, according to U.S. Energy Information Administration data.
"It is slightly more beneficial for the shipping market to
bring in oil products from the U.S. as compared to European
originated imports. But the distances are close," said Peter
Sand, chief shipping analyst with trade association BIMCO.
And state-of-the-art and export-oriented refineries in the
U.S. Gulf Coast, Asia and the Middle East are eyeing Africa in
their constant search for new markets.
"For us, East Africa is a very important growth market. We
supply either directly or indirectly a large part of that," Tony
Fountain of Reliance Industry, which operates the
world's largest refinery, said last month.
In West Africa, a product market long dominated by Europe,
traders from the U.S. Gulf and Asia are now capable of taking
advantage of arbitrage windows to ship products.
"In my view Africa is there to stay. It will take a long
time for them to build their own refinery capacity," said Hans
Noren, president of international tanker group Concordia
Maritime, which is active in the products trade to Africa.